Society of Lloyd's v. Webb

2002 WL 32099847 (5th Cir.)

United States Court of Appeals, Fifth Circuit.

SOCIETY OF LLOYD'S, Plaintiff-Appellee, v. James Duncan WEBB, Defendant-Appellant.

No. 01-10773.

January 7, 2002.

Appeal from the United States District Court for the Northern District of Texas Dallas Division

Appellant's Reply Brief

Bradley W. Hoover, Hoover & Harger, P. C., 12946 Dairy Ashford, Suite 200, Sugar Land, Texas 77478, Telephone: (281) 340-9600, Telecopier: (281) 340-9601, Attorneys for Appellant.

TABLE OF CONTENTS

TABLE OF CONTENTS ... i

TABLE OF AUTHORITIES ... iii

SUMMARY OF ARGUMENT ... 1

ARGUMENT ... 3

I. The special procedural system created by Lloyd's bylaws prevented Lloyd's investors like Webb from asserting basic English defenses and deprived Webb of due process in this case ... 4

A. If the Texas Recognition Act requires evaluation of a legal system for due process, the system that must be evaluated is the special procedural system created by Lloyd's through power granted from Parliament. ... 4

B. Even if "international due process" is the proper statutory standard, the Lloyd's self-created procedures used here were not "fundamentally fair" and offended "basic fairness." ... 6

1. Application of an "international due process" is not supported by the language of the Texas Recognition Act. ... 6

2. Because of the pay-now, sue-later clause, Webb's liability to Lloyd's has never been fully litigated ... 7

3. Because of the conclusive evidence clause, Lloyd's avoided submitting credible proof of the amounts it claimed Webb owed ... 8

C. Lloyd's argument that due process is satisfied by the opportunity to assert fraud claims in a later proceeding is specious ... 10

D. No exigent circumstances justified a pre-hearing deprivation of Webb's property at the time the judgments were entered. ... 13

E. Webb did not waive his due process rights ... 15

II. The Court should refuse to recognize the judgments as being contrary to Texas public policy ... 16

CONCLUSION ... 17

CERTIFICATE OF SERVICE ... 18

CERTIFICATE OF COMPLIANCE ... 19

TABLE OF AUTHORITIES

CASES:

Brock v. Roadway Express, Inc., 481 U.S. 252 (1987) ... 9

Connecticut v. Doehr, 501 U.S. 1 (1991) ... 9

Freytag v. Commissioner, 501 U.S. 868 (1991) ... 15

Haynsworth v. Corporation of Lloyd's, 121 F.3d 956 (5th Cir. 1997) ... 12, 17

Hastings v. Bushong, 252 S.W. 246 (Tx. App - San Antonio 1923, writ dism'd w.o.j.) ... 16

Ingersoll Milling Machine Co. v. Granger, 833 F.2d 680 (7th Cir. 1987) ... 6

Johnson v. Zerbst, 304 U.S. 458 (1938) ... 15

Mathews v. Eldridge, 424 U.S. 319 (1976) ... 1

Michigan v. Tyler, 436 U.S. 499(1978) ... 14

Penn Central Corp. v. Railroad Vest Corp., 955 F.2d 1158 (7th Cir. 1992) ... 10

Society of Lloyd's v. Ashenden, No. 98 C 5335 (N.D. Ill. April 22, 1999) aff' d, Society of Lloyd's v. Ashenden, 233 F.3d 473 (7th Cir. 2000) ... 2, 6, 7

Strick Lease, Inc. v. Cutler, 759 S.W. 2d 776, (Tx. App. - El Paso 1988, no writ) ... 17

Tri-State Development, Ltd. v. Johnston, 160 F.3d 528 (9th Cir. 1998) ... 9

U.S. v. Olano, 507 U.S. 725 (1993) ... 15

STATUTUES:

Texas Civil Practice & Remedies Code §30.001 ... 16

Uniform Foreign Country Money - Judgment Recognition Act, Tex. Civ. Prac. & Rem. Code §36.005(a)(1) ... 3, 4

Uniform Foreign Country Money - Judgment Recognition Act, Tex. Civ. Prac. & Rem. Code §36.005(b)(3) ... 4

Defendant James Duncan Webb files this reply to the Brief of Plaintiff-Appellee Society of Lloyd's.

SUMMARY OF ARGUMENT

Lloyd's attempts to reduce Webb's argument that he was denied due process in England to a whiney complaint over an unfavorable result. After all, Lloyd's contends, the Lloyd's investors like Webb were only prevented from raising typical English defenses to Lloyd's collection suits. Under a specially implemented procedure applied in England only to Lloyd's, the English court assumed that Webb was fraudulently induced into obligations at Lloyd's, but refused to allow the standard English defense, along with other defenses, resulting in summary judgment for Lloyd's. The special Lloyd's system prevented due process for Webb. The right to assert defenses is the most basic right afforded by due process of law. Mathews v. Eldridge, 424 U.S. 319, 333 (1976) ([the fundamental requirement of due process is the opportunity [for the property holder] to be heard at a meaningful time and in a meaningful manner.)

In its brief, Lloyd's understandably tries to exploit the fact that Webb did not appear and try to present a defense in the English action. But Webb did not waive his due process rights through the procedural default. Waiver is the intentional relinquishment of a known right. By the time of Webb's default, the English courts had determined that Webb, like all the other Lloyd's investors, had no due process right under the special Lloyd's system. Through "test cases," the English courts had prohibited all Lloyd's investors from raising standard English defenses. Since that result was predetermined, it would have been futile for individual investors such as Webb to try, yet again, to convince the English courts to give them a meaningful pre-deprivation hearing. See, Society of Lloyd's v. Ashenden, No. 98 C 5335 (N.D. Ill. April 22, 1999) aff'd, Society of Lloyd's v. Ashenden, 233 F.3d 473 (7th Cir. 2000) (it was clear that the [defendant has] been denied a meaningful pre-deprivation hearing ... [he was] not allowed to seriously challenge the claims brought against [him] by Lloyd's). Webb did not waive by default in England a right that the English courts said he did not have at all.

Lloyd's does not contest that, in previous actions to enforce a forum selection clause between these parties, the American courts relied upon what they believed to be substantial due process protection normally given to litigants in England. Lloyd's does not deny that once Lloyd's successfully moved the United States litigation to England, Webb was subjected to a previously undisclosed special procedure, unilaterally implemented through a series of Lloyd's bylaws. Lloyd's does not dispute that the result of Lloyd's special unilateral procedure was to bind Webb into a contract that he did not negotiate, that he never read, never saw and never agreed to, that included a pay-now, sue-later clause - preventing Webb from presenting common defenses - and a conclusive evidence clause - excusing Lloyd's from having to substantiate the amount Webb is alleged to owe. Lloyd's does not contest that the figures used to obtain the judgment against Webb may not be accurate. Lloyd's does not contest that Webb would not have been allowed to take any discovery regarding how his alleged liabilities were calculated and he would not have been allowed to cross examine any witnesses over the damage figures. Webb was given no information concerning the complex substrate of claims experience, projected liabilities and actuarial assumptions that supposedly formed the basis for the bottom line. The amount upon which this judgement was based was not even subject to an independent audit.

Webb was denied even the most basic, fundamental aspects of due process. The Texas legislature specifically prohibits enforcement of foreign judgments obtained in this manner. Uniform Foreign Country Money - Judgment Recognition Act, Tex. Civ. Prac. & Rem. Code §36.005(a)(1)(the "Texas Recognition Act). This Court should uphold the Texas legislature's mandate and deny recognition of Lloyd's judgment.

ARGUMENT

The question presented in this appeal is not whether the English courts properly applied English law, or whether the judgment is valid or properly enforceable in England. The question is whether the judgment should be enforced in Texas. Webb is not asking the court to invalidate the English judgment, only not to enforce it here. That determination is based solely on the application of the Texas Recognition Act. The controlling issues under Texas law are whether the "judgment was rendered under ... procedures compatible with the requirements of due process of law" or whether the "cause of action on which the judgment is based is repugnant to the public policy of this State." Tex. Civ. Prac. & Rem. Code §36.005(a)(1) and (b)(3). Webb is not asking this court review the English court's decision on English substantive law. Webb is asking this court to consider and decide the narrow, but vitally important, question of whether the judgment - as rendered - can, or should be, enforced in Texas. This was not decided in the prior litigation in this country or in England. The Texas Recognition Act compels this court to this duty.

I. The special procedural system created by Lloyd's bylaws prevented Lloyd's investors like Webb from asserting basic English defenses and deprived Webb of due process in this case.

Lloyd's arguments that the judgment should be enforced fall into five categories. First, Lloyd's contends that whether Webb was given due process in England is irrelevant, since the English judicial system generally affords due process to litigants. Second, Lloyd's contends that the English proceedings satisfied the requirements of "international due process," as well as domestic due process. Third, Lloyd's argues that due process does not require that a defendant be allowed to assert defenses if he can assert affirmative claims in a later proceeding. Fourth, Lloyd's argues that exigent circumstances justified depriving Webb of basic due process rights. Fifth, Lloyd's contends that Webb waived his due process rights. Each of these arguments fail and will be addressed in order.

Lloyd's argument that the Texas Recognition Act requires only an analysis of whether the English judicial system generally affords due process is contrary to both the case law interpretation of the act, as well as the record of the Committee of the Whole of the National Conference of Commissioners on Uniform State Laws that approved the uniform act and submitted it to the states for approval. See Appellant's Brief at 41-44. Even if the statute applied broadly to the legal system of the foreign jurisdiction rather than a case by case analysis, the requirements for recognition of the judgment under the statute were not met.

Lloyd's did not obtain its judgment against the investors through normal channels of English procedure and even English due process. The English court did not apply standard English law and procedure. Instead, the English court applied what might by analogous to administrative rules and procedures in the United States. The administrative system was a special, self-serving procedure that Lloyd's remarkably created itself, for its own benefit, through a general self-regulation authority granted to it by the British Parliament. It is this administrative system of rules and proceedings that constitutes the system that was not compatible with the requirements of due process of law.

Lloyd's specially created procedure allowed Lloyd's to unilaterally and involuntarily bind Webb to a contract called the Equitas Reinsurance Contract (the Equitas Scheme) that Lloyd's admits Webb never signed, never agreed to and never actually saw. Lloyd's then enforced two self-serving provisions in the Equitas Scheme - a conclusive evidence clause and a pay-now, sue-later clause that operated to exclude any defense by Webb against alleged liability to Lloyd's. These clauses allowed Lloyd's to obtain the judgment based on debt allegations that were not subject to discovery, independent audit, cross examination or the opportunity to present controverting evidence. Thus, Lloyd's was able to obtain this judgment against Webb based on a contract that he never agreed to and without proving liability or the amount of damages. It is difficult to imagine how such a system can fit anyone's version of due process.

Webb is not simply arguing here that English procedure does not mirror United States procedure, Webb argues that the procedure followed in this case so deviates from traditional English procedure and notions of due process that serious injustice is involved. See, Ingersoll Milling Machine Co. v. Granger, 833 F.2d 680, 687 (7th Cir. 1987).

B. Even if "international due process" is the proper statutory standard, the Lloyd's self-created procedures used here were not "fundamentally fair" and offended "basic fairness."

1. Application of an "international due process" is not supported by the language of the Texas Recognition Act.

Due process is a deeply ingrained legal right in American jurisprudence. The basic requirements of due process under American law are well established and clearly defined. While the Seventh Circuit in Ashenden refers to American due process as a "complex concept", 233 F.3d at 477, in the context of this case, basic American "due process" would provide the clear and simple right to a meaningful pre-deprivation hearing, absent exigent circumstances. That right and what it entails is not "complex" and provides what should equal the minimum standard of fundamental fairness and basic fairness in any world forum. That standard of due process was not met here. The investors were simply not given a fundamentally fair hearing in England.

The conclusion of the court in Ashenden that the statutory reference to "due process of law" refers to a less onerous process allowed under international due process has no basis in the statutory language and violates traditional rules of statutory construction. "International due process" is not a generally accepted rule of law. The concept as expressed by the Seventh Circuit did not exist at the time that the Recognition Act was drafted and could not have been contemplated by the Texas legislature when the Recognition Act was adopted. There is no reference to legislative history in the Ashenden case, or in the record of this case, to justify a conclusion that by "due process" the legislature meant anything other than the commonly accepted American meaning of the terms. In any event, even under the judicially constructed "international due process" standard, the special procedures created by Lloyd's and specially enforced against Webb were not fundamentally fair and violated basic fairness.

2. Because of the pay-now, sue-later clause, Webb's liability to Lloyd's has never been fully litigated.

The real underlying issues of Webb's alleged liability to Lloyd's have never been litigated. The English courts never considered the investors' defenses to the judgment Lloyd's seeks to enforce. The English courts ruled that the investors could not assert common defenses, even if they timely appeared in the English action and timely attempted to assert those defenses. And even though those defenses could have and likely would have excused, eliminated or reduced the alleged liability that forms the basis for the judgment.

Because the investors were not, and to this day have not, been permitted to assert and have heard exculpatory and other defenses to Lloyd's claimed liability, the investors have never had a meaningful hearing as Lloyd's contends. The fact that Webb received notice and that a hearing was held does not make that hearing meaningful. The hearing notice in this case did nothing more than invite Webb to be a mere spectator in the courtroom, while Lloyd's paraded unsubstantiated evidence before the court that was rubber stamped into a judgment.

To prove that there was a hearing, Lloyd's makes much of the fact that the English courts held hearings over 32 days and issued opinions totaling hundreds of pages. However, the hearings that Lloyd's trumpets were over whether Lloyd's would be permitted a special procedure that would prevent Webb from being heard. Lloyd's prevailed on that issue, so no hearings on the merits were held in England. The extensive hearings prove only the great distance Lloyd's has gone to prevent the merits of the investors' defenses from ever being heard.

3. Because of the conclusive evidence clause, Lloyd's avoided submitting credible proof of the amounts it claimed Webb owed.

The investors in this case have never seen any backup documentation or calculations that explain why they owe the amounts Lloyd's claims or how those amounts were calculated. Lloyd's has also not presented that information in this proceeding. Yet, Lloyd's argues that Webb was allowed a defense to the collection demand. To support its position, Lloyd's emphasizes the English court's requirement that Lloyd's produce additional records concerning the calculation of the Equitas premiums beyond its original bare bones submissions. Lloyd's further states that it produced backup records detailing the judgment calculations to Webb. Lloyd's argument is overstated. First, the additional records still lacked foundation and completeness to prove the alleged amount of liability. Second, Webb was prohibited from challenging Lloyd's failure to give the investors certain credits that were due to them. Third, the investors were given no process whatsoever by which to challenge or test the amounts claimed through discovery and cross-examination. See, Brock v. Roadway Express, Inc., 481 U.S. 252 (1987).

Operating through the MSU, Lloyd's unilaterally calculated the amount of Webb's supposed liability. Lloyd's figures have never been subjected to an independent audit, even though the English court recognized the exercise of calculating the premium to be a highly complex one. The complexity itself should cause the figures to be subject to scrutiny because complexity can increase the possibility of errors. Lloyds' even admitted to some glaring errors. Yet none of the constituent calculations was turned over to Webb, only the final figures claimed to be due. Under the Equitas Scheme, these unsubstantiated figures were conclusive unless Webb could show manifest error. But Webb was barred from establishing manifest error because he was prohibited from any discovery, any cross-examination and any other form of testing the basis of the calculations. The risk of erroneous deprivation is high ... [when the] case involves a factual inquiry and is not amenable to realistic assessment based only on one-sided, self-serving, and conclusory submissions. Tri-State Development, Ltd. v. Johnston, 160 F.3d 528, 531 (9th Cir. 1998), quoting Connecticut v. Doehr, 501 U.S. 1, 14 (1991).

The proceeding in England was indeed summary. Judgment was rendered against the investors without the benefit of a defense, without discovery, without the opportunity to put on controverting evidence and without an opportunity for cross examination. This is precisely the type of proceeding that the United States Supreme Court has determined violates due process.

C. Lloyd's argument that due process is satisfied by the opportunity to assert fraud claims in a later proceeding is specious.

Lloyd's next argues that due process is met here by granting Webb the chance to sue Lloyd's for fraud in a later, separate proceeding. Lloyd's argument fails for three reasons. First, fraud is not just an affirmative claim, it is a defense to liability under both English and United States law. The English courts egregiously denied Webb a defense that it affords to other English litigants because of the "special procedure" allowed to Lloyd's. See, Penn Central Corp. v. Railroad Vest Corp., 955 F.2d 1158 (7th Cir. 1992)(rejecting an argument that a later fraud suit would satisfy due process).

Second, while Lloyd's insinuates in its brief that the Equitas Scheme provided a market wide mutual release, that insinuation is not true. Under the Equitas Scheme, Webb supposedly released Equitas from any liability, but Webb is not released from future premium demands by Equitas. In other words, the premium demand that formed the basis of the current judgment may not be the final premium demand made on Webb. Equitas may seek more money from Webb in the future. Without the right to assert fraud as a defense, Equitas can seek and obtain additional judgments against Webb in the future, despite a subsequent fraud claim. Thus, a subsequent fraud claim may not compensate Webb for all future damages for Equitas premiums. Only fraud as a defense cuts off future losses.

Lloyd's repeatedly contends that the Equitas reinsurance scheme was no different than the reinsurance to close schemes that agents regularly bound Names to in the past without the Names express authorization. But the Equitas Scheme is different. In the past, once the reinsurance premium was paid, the reinsurance protection was complete and final. Here, Equitas can keep coming back for more money. Equitas is not reinsurance at all, it is a method for Lloyd's to collect money that it defrauded Names into paying while, at the same time, preventing the Names basic defenses to collection.

Nothing protects Webb from further premium demands and further collection suits either by Equitas, or by Lloyd's in the name of Equitas. Lloyd's may conceivably be entitled to recover those further premiums because by contract, Lloyd's neither has to justify or prove the amount demanded or answer for fraud in the collection suit. The only way that Webb's due process rights can be protected is if he is able to assert his defenses, including fraud, in response to the collection suit. Otherwise, the defense simply does not supply due process protection.

Third, fraud is not Webb's only defense to the payment of the Equitas premium. Webb also challenges the calculation of the amount allegedly owed. Lloyd's argues that any premiums paid by Webb on the judgment are potential damages in a fraud action. While that may be true, the separate fraud action again provides incomplete due process to Webb for the following reasons.

First, a subsequent fraud claim will not remedy a non-fraudulent miscalculation of the alleged judgment debt through such things as computer error, bad actuarial advice, inadvertence or simple sloppiness. Second, the plain meaning of the conclusive evidence clause forecloses a later suit to remedy a non-fraudulent miscalculation:

For the purposes of calculating the amount of any Name's Premium ... the records of and calculations performed by ... [Lloyd's] shall be conclusive evidence as between the name and [Lloyd's], in the absence of manifest error.

Third, the English court decisions in this matter do not even mention the availability of a subsequent and separate action for money due on account of erroneous calculation. The English court freely discussed the possibility of a comparable fraud action. The absence of any comparable discussion of some subsequent action in which the conclusive evidence provision would not apply is explicable only because there is no such action. Lloyd's does not deny that any such non-fraudulent errors cannot be litigated at any time in the future. The English judgments are, as all parties agree, final and conclusive and fully enforceable in England. Accordingly, it can no longer be challenged as to amount or erroneous calculation.

Lloyd's further claims that the decision in Haynsworth v. Corporation of Lloyd's, 121 F.3d 956 (5th Cir. 1997), cert. denied, 118 S.Ct. 1513 (1998) supports enforcement of the present judgments. There, the Fifth Circuit did hold that English remedies did not have to be identical to United States remedies. 121 F.3d at 967. However, the Fifth Circuit did not contemplate that a special procedure would be applied to Lloyd's that would deprive Webb of basic due process, including defenses that are regularly afforded to other parties under English law. Moreover, the Fifth Circuit in Haynsworth was deciding a different issue than what is now before this court. The Fifth Circuit's decision that the case had to be litigated in England due to the forum selection clause is not tantamount to a decision that any judgment rendered in England would be enforced here regardless of the procedure involved in rendering the judgment.

D. No exigent circumstances justified a pre-hearing deprivation of Webb's property at the time the judgments were entered.

Lloyd's argument that exigent circumstances justified a pre-hearing deprivation under the facts of this case is spurious. The United States Supreme Court has held that due process is not violated by a pre-hearing deprivation in certain narrow circumstances. However, for a pre-hearing deprivation to pass due process muster, (1) there must be good reason to put off the hearing and (2) there must be an effective post-deprivation remedy. Neither element is met here.

Lloyd's does not effectively address Webb's arguments that exigent circumstances do not exist here. As expected, Lloyd's wants the court to give greater weight to the interest of the party seeking the prejudgment remedy. That factor does not apply in this case because Lloyd's was not seeking a prejudgment remedy, it sought and obtained a judgment without a meaningful hearing. [FN1] It now seeks to enforce that judgment.

FN1. In the district court proceeding, Lloyd's repeatedly asserted statements like it "proved its entitlement to the premiums before the English courts," and "Webb has received the benefits of reinsurance over nearly four years without paying for it. The money judgment will only remunerate Lloyd's for benefits already received ...." These statements and others like them in Appellee's Brief beg the due process question. Lloyd's "proved its entitlement" only by implementing procedure that excluded any defense. It is not hard to "prove" your case once you handcuff and gag the other side. Moreover, Webb has only benefitted from Equitas if he needed reinsurance and he only needed reinsurance if he was obligated on the reinsured liabilities. Of course, Webb was not liable on the reinsured liabilities if Lloyd's defrauded him. That is why Lloyd's is so vigorously fighting to prevent any defense. Lloyd's payment of the Equitas premium did not benefit Webb, it only benefitted Lloyd's.

Even if Lloyd's interest should be balanced into the due process test, Lloyd's arguments about its purported interest in a pre-hearing deprivation of Webb's property is misplaced. The critical point at which exigent circumstances must exist is at the time the hearing is being held, not as Lloyd's contends when the Equitas Scheme was implemented. See, Michigan v. Tyler, 436 U.S. 499(1978)(the process deprivation must be connected with a current exigency, not a past one). Even if exigent circumstances that would support a pre-hearing deprivation of Webb's property existed at the time the Equitas Scheme was implemented, which Webb denies, those exigent circumstances did not exist at the time Lloyd's filed suit to obtain the judgment it seeks to enforce here. Lloyd's does not even claim that exigent circumstances existed when it filed to obtain the present judgment. At the time Lloyd's filed the action to obtain this judgment, the Equitas premium had been paid, the Lloyd's policy holders were guaranteed their money to the extent the Equitas premium is sufficient, the Lloyd's market was not in danger of bankruptcy, and by Lloyd's scheme, the Names themselves were protected through the Equitas premium until their liability for that premium could be determined.

Furthermore, Lloyd's admits by its conduct that expedience in collection of the amounts allegedly owed was not vital to its well being. First, Lloyd's offers that the English courts conducted 32 days of hearings, which were spread out over several years. In the time and energy that Lloyd's expended to keep Webb from asserting defenses and fully litigating the merits of the claims, defenses could have been asserted, Lloyd's would have received its money in the same amount of time, if it prevailed, and Webb's right to due process could have been preserved. Second, Lloyd's did not prosecute all of the Names cases at once. Lloyd's proceeded in stages, using test cases. Third, even now, Lloyd's is not seeking to enforce all of the judgments that it obtained. Even though it has obtained judgments against Names throughout the United States, to date it seeks to enforce those judgments only in a few states against a few names. This conduct hardly supports Lloyd's claims that the circumstances supported a rush to judgment and an emergency situation that justified postponement of Webb's meaningful due process hearing.

The judgment that Lloyd's seeks to enforce here was rendered through procedures that prevented Webb from asserting valid defenses to liability and violated Webb's due process rights. Under the Texas Recognition Act, the judgment cannot be enforced and the court should grant Webb's motion to deny recognition of Lloyd's foreign judgment.

E. Webb did not waive his due process rights.

Webb did not waive his due process rights through the procedural default. Traditionally, a procedural default is not viewed as a waiver, but a forfeiture of a right. Waiver is different from forfeiture. U.S. v. Olano, 507 U.S. 725, 733 (1993). Forfeiture is the failure to make the timely assertion of a right, waiver is the "intentional relinquishment or abandonment of a known right." Id. See also, Johnson v. Zerbst, 304 U.S. 458, 464 (1938); Freytag v. Commissioner, 501 U.S. 868, 894(1991). Webb did not intentionally relinquish a known right. By the time of Webb's default, the English courts had determined that Webb, like all the other Lloyd's investors, had no due process right under the special Lloyd's system. Through "test cases," the English courts had prohibited all Lloyd's investors from raising standard English defenses.

Since that result was predetermined, it would have been futile for individual investors such as Webb to try, yet again, to convince the English courts to give them a meaningful pre-deprivation hearing. In other words, since the fate of Webb's claims was fully decided before the default, the manner in which Webb's claims were or would have been decided by the English courts if Webb had appeared is not subject to speculation. Webb was fully bound by the results of the "test cases" and Webb's claims were litigated through those cases, despite his non appearance, to the limited extent that the English courts allowed all investors to litigate their claims. Under the unique way that the English court proceeded with the investors' claims, Webb neither waived, nor forfeited his due process rights.

II. The Court should refuse to recognize the judgments as being contrary to Texas public policy.

Lloyd's correctly states that the public policy exception to judgment recognition is discretionary, as opposed to the due process exception which requires non-recognition in Texas. But the fact that the public policy exception is discretionary does not mean that it should be ignored. Part of the duty of the courts sitting in Texas is to preserve the rights of Texas citizens in accordance with the express direction of the Texas legislature.

Lloyd's arguments in response to Webb's public policy contentions are unconvincing. For example, Lloyd's essentially ignores Webb's argument regarding cognovits. The Texas legislature prohibits cognovits and confession of judgment provisions in contracts and Texas courts have long refused to enforce judgments obtained through cognovits. Tex. Civ. Prac. & Rem. Code §30.001; Hastings v. Bushong, 252 S.W. 246, 249 (Tex. App. - San Antonio 1923, writ dism'd w.o.j.). Lloyd's attempts to dismiss this argument by claiming that the Texas Recognition Act only applies to causes of action, such as a breach of contract, rather than the effect of enforcement of a particular provision within that contract. However, Lloyd's interpretation of the Texas Recognition Act is contrary to that of the Texas courts, at least as to cognovits. See, e.g., Strick Lease, Inc. v. Cutler, 759 S.W.2d 776, 777 (Tex. App. - El Paso 1988, no writ)(cognovit judgments from sister states are only enforced if the defendant has voluntarily, knowingly and intelligently waived his rights).

Webb's public policy challenge is also not precluded by the Haynsworth decision. 121 F.3d 956. In Haynsworth, the Fifth Circuit dealt with the enforcement of the forum selection clause. It did not address choice of law issues and certainly did not consider the issue of Texas' recognition of any judgment obtained by Lloyd's in England.

CONCLUSION

For the foregoing reasons and the reasons stated in Appellant's Brief, Webb requests that this court reverse the District Court and refuse recognition of the judgment Lloyd's obtained against Webb in England.